How to use transferable LC more effectively? PART - II By Isaac Tudu

How to use transferable LC more effectively? PART - II
A LC is issued in favour of the seller, who ships the goods and claims payment under LC. It is typically applicable when the Seller is the manufacturer of the goods.
But when the buyer does business with an intermediary trader, they seek a means of finance for their purchase without engaging their own resources.
Transferable LC meets the above needs as LC issued in favour of the trader can be used as a means of paying the sources from which the trader obtains goods.
It is a very good product for exporters, engaged in the trading business, to increase their export/sales business. Due to time constraints, I have divided the entire presentation into two videos i.e. PART- I and PART - II.
In this present 2nd video (PART - II), I have covered the following topics:
• Important points of transferable LC
• Flow- Chart of transferable LC
In my first video I had covered the following topics (PART - I):
• Understanding transferable LC
• Need of transferable LC
• Advantage of transferable LC
• Risk and cost of transferable LC
• Transferable LC - How does it work?
UA-cam Link: • How to use transferabl...
About Speaker:- Isaac Tudu is an ex-banker with India’s largest Banks i.e. ICICI Bank and State Bank of India having more than 25 years of banking experience in Trade Finance and Credit with ICC certifications like CDCS, CSDG & CITF etc.
Isaac Tudu provides "CDCS Exam Preparation Online Course" for Bankers and Professionals working in Export-Import Business.
Isaac’s Vision: To create a financial world where SMEs are well conversant with Trade Finance without any ambiguity. Isaac’s Mission: To help 100,000 SMEs to achieve their Sales & Business Growth drastically by enabling them through the "Hassle-Free Trade Finance" Online Programme.
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#importexport #tradefinance#lettersofcredit#lc#msme#sme#bankers#cdcs

[@kharoteashutosh87]

Sir,
Very informative and helpful
Well expanded
Thanks a lot 🙏

[@SanjaySharma-rj6nx]

SIR, YOU EXPLAIN SO CLEARLY!! SALUTE!!...PLEASE MAKE DETAILS VIDEO IN INVOICE & DRAFT YOU MENTION DURING LC DOCUMENTATION

[@BanerjeeGaurab]

Good follow up video for the first video.

[@IsaacTudu]

Thanks a lot Gaurab..

[@mdsiddiquequraishi1541]

ammazing sir thank you. sir please share your video on assignment of proceeds in context to transferable LC

[@IsaacTudu]

Thanks a lot.
Under transferable LC, the need for first beneficiary to assign any proceed does not arise as the moment transferable LC is transferred, second beneficiary is entitled for proceeds subject to complying presentation under transferred LC.

[@prateeks1990]

Very good videos.. practical and real life examples provide clear insight. Example why insurance value should be increased cleared my doubt which I had since long. Would look forward for more of your videos.

[@prateeks1990]

Sir, can you please explain why Transferring bank will make payment to second bene after it receives payment from Issuing Bank? Will it not be complied to reject or accept documents within 5 working days and make payment as per LC payment terms once accepted (irrespective it has received the payment or not from Issuing/ rembursing bank)?

[@IsaacTudu]

No, because while transferring the LC, transferring bank usually put this condition that payment will be given to 2nd beneficiary only when they receive the payment from LC issuing Bank. Please remember:
At the request of the first beneficiary, the transferring bank, if agreeable, makes the transfer part of the LC available to the second beneficiary. (Article 38.a). A bank is under no obligation to transfer a LC except to the extent and in the manner expressly consented to by that bank.
Please note the wording above " except to the extent and in the manner expressly consented to by that bank". So transferring Bank usually gives the consent to transfer the LC with their own condition. Why they would put the onus to themselves for payment to 2nd beneficiary, when they are not the LC issuing Bank. Therefore, while transferring the LC, they put the condition that payment will be given to 2nd beneficiary only when they receive the payment from LC issuing Bank.

[@prateeks1990]

@@IsaacTudu Thanks for the explanation sir. But I feel, this condition dilutes the security provided by LC as a product and is a disadvantage to the second beneficiary.

[@harsimranjeetsingh3761]

Sir, however your videos are quite useful and full of knowledge and appreciable But it would be more better if you make these videos in "Hindi" language if possible.
Jus for sake of easy learning and clear understandings for the evryone.
Otherwise i mus say... Your stuffs are very well elaborated.

[@IsaacTudu]

Thanks for your suggestion. Let me try.

[@Rajuvidhu]

Sir can you prepare video on ucp articles and isbp and especially on isp98 for Cdcs aspirants it’s a request

[@sooribabu4895]

Can the trader(intermediator) submit the Switch B/L to negotiating bank if the Parent LC says submitt Original B/L?

[@satisharyan2006]

If second beneficiary is happened to ship the goods directly to the ultimate buyer. The ultimate buyer will come to know about the actual supplier despite effecting substitutions of invoice and draft by first beneficiary. This is because of the fact that the name of second beneficiary will appear as a shipper in the bill of lading or airways bill.
In this situation, first beneficiary might lose his client as ultimate buyer will find it more profitable if he enter into a trade contract with second beneficiary.

[@vinaymenon8148]

Sir, Great video, one doubt,
1. If the 2nd beneficiary(supplier) is shipping the goods he will come to know the buyer details as he needs to know whom to ship and
2. the buyer will come to know who has shiped the goods in the shipping bill provided by the supplier.
How can we avoid this and ship under 1st beneficiaries name?

[@IsaacTudu]

Thanks for your comment.
When a transferable LC is transferred, the name of the trader, as first beneficiary, can be substituted in the transferred LC for that of the applicant. This provision can make it more difficult for the supplier (as second beneficiary) to find out to whom the trader is supplying the goods. However, please note that it is often the case that all the parties are aware of their existence in this type of transaction.